ADP - Earnings call 1 2024 | Automatic Data Processing, Inc.

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Operator

Good morning. My name is Michelle, and I'll be your conference operator. At this time, I would like to welcome everyone to ADP's First Quarter Fiscal 2024 Earnings Call. I would like to inform you that this conference is being recorded. After the prepared remarks, we'll conduct a question-and-answer session. at given be will that time. Instructions

now Hussain, Vice will turn go the Danyal Mr. to over President, conference ahead. I Investor Please Relations.

Danyal Hussain

Fiscal and CEO; And ADP's Don McGuire, today Thank everyone, and Maria XXXX CFO. Quarter are President Michelle. Participating Earnings our you, Black, our Call. welcome, First to

results we the this morning, for Earlier released our quarter.

materials Investor find investors.adp.com, at will also Relations the today's are presentation where on accompanies SEC's the available earnings website Our website our that investor and you call.

non-GAAP reference be reconciliation will these measures, in which and we exclude most to call, our with of of of financial we believe to found the our A comparable useful that earnings the During measures items, along description investors GAAP release. to non-GAAP be certain measures, the impact items. can

statements additional also our that to on you that to will We some expectations. for future review could involve from actual call to contain SEC events information risks. the refer differ and Today's materially results our encourage current cause factors filings with forward-looking

turn I'll to Maria. over it now

Maria Black

the we we and significant you, quarter. XX% joining we morning, adjusted This growth quarter everyone, growth. X% strong you, shared first EPS with And Thank you us. reported results, on and priorities for progress including thank X Danny, strategic revenue made last

steady, demand quarter Among record-level start which end with pipeline Let healthy me bookings our portfolio across in September. year at of solid a reviewing was to the Services the quarter. has a performers new business supported quickly remained our our some new business and the we financial maintained a begin our solutions. our were business. best and a first business in particularly Overall small by for of HCM had compliance-oriented highlights strong from first by We the and volume Employer quarter,

Our Employer exceeded rate once our retention Services again expectations.

including among prior slightly clients. declined retention the see resilience business versus our continued we small to in year, our Although portfolio,

new a to NPS historically scores levels. near our these retention importantly, all-time reached high stay us high, More overall positioning

PEO first X% by pays add employees control for was at Our environment as was continue Employer control X% the growth. Services offset deceleration as our growth solid as moment, pays services demand bookings to reflecting the last slowing. clients will well guidance And our quarter, stable speak performance, revenue gradually relatively growth PEO in the outsourcing healthy. quarter for versus that per our in quarter a in is Don pace updated remained other but a our PEO PEO of per to

meaningful that of across made on, quarter. strategic X we all our last priorities progress Moving we outlined

Let with me update to took some lead start best-in-class QX HCM on with in we actions technology. an

and we First, owners QX, further Gen small-business HR it UI into guidance. AI Roll quickly features to we began make integrated its our embedding for conversational In Gen AI to enhance customized easier even obtain into products. and payroll

set began ADP the Assist, for. live employees. feature and insights also HR Assist Workforce beginning looking continuing forward select We've out enabled they're We the practitioners to insights simple. Assist to clients, report Now for rolling make and allows that complex We work recommendations with this HR of ADP which to easily look build both practitioners of enhance extract further on feature of experiences the to the to ADP delivers

developments also We AI. exciting had product some beyond

a we have Workforce already using ADP for, across data the and product experiences uptake. To new securely a personalized we systems recently is asked help Our have to complexity today. APIs deep this, running need us increasingly API and Central, tools. address manage connect they business their and strong pre-populated feature clients tell our easily a This integrations which of help called seen a to them businesses clients and enables launched

workflow intelligent API Central of Sora, an QX, integration complemented tool. launch In data the the of automation we and with acquisition

smarter will such experience applications and clients as creating unique HR, IT, Sora's a for people capabilities CRM our various more, to automate unifying by easier-to-use and our processes allow clients.

offering offering of help to needs payroll tailored industry. a with HCM unique Now In Construction, the and QX, clients specialists we Workforce construction for launched also industry. of Now combines and with the the a This designed ADP capabilities reporting for comprehensive verticalized Workforce dedicated team construction

of to our warrant the While ADP in clients up across a the offering complexity And to mid-market. with more has test excited as stood served tailored always enough further spectrum full strengthen industries, vertical a solution. construction we're

that address. the our to to frontier investments natural stay our lead HCM core we technology associate venture to corporate HCM strengthen fund business best-in-class the build developing ADP in develop to in to extend on month. with early And lifestyle with Two announced in Ventures, of benefits on drive and to adjacencies. businesses workers and addition we their our also and launch We're process are innovation. improving and these organic will We ones. start-ups and to the into focus partnerships early-stage have of attuned Leading that efforts simplifying the requires complex invest capital partner earlier of management excited now this incredibly we new engagement

representing of Overall, QX will on shaping position continue seeds work. to work of future of much the was the the a we're front, very product quarter us innovation busy with doing that

in provide second is outsourcing Our unmatched expertise strategic solutions. to priority

Gen In for pilot of the flow for addition pilot clients, work new associates. ADP embedding ADP Assist, launched of our Assist of our we also AI launching the and Agent the to

writing allow to our after us client summarization effective quickly to associates have longer we also and client associates. spend feature, should to to more to Assist feedback So real-time time far, associates aggregate no our which make enabled our improve notes calls, capability service case Agent this select call up continuously Thanks need those products.

client for workflows accumulated support also individual with easily guided to to cases. way We associates and our a that's are customized guidance knowledge Agent more help share piloting real-time to content Assist and them their in

features service and client associates reach new faster better, to our toward to help scores and excited continue to continue to Assist are service our satisfaction We additional levels. deliver Agent implementation record working help

global through And our we In global payroll to our the strategic on our third leading extended QX, benefit acquiring advantage. scale. Our of we footprint payroll this BTR, August, with positioning prospects. growth by priority clients in is partner ecosystem in while strengthen Acquisitions long-time a our attractive countries Sweden. our to like HCM also this in multi-country grow us business local business expanded

also partnership into an outside SMB the an existing QX, allow In beginning payroll believe on-the-ground representing Roll U.S. expansion in we our we we will And during European where launched market the provide coupled Workday business expand Ireland, app, the with AI-based enhanced deliver our ecosystem, of compliance to payroll, jointly clients us world. with the to clients QX, our serve we this experience announced and the and for global like personalization HR overall long-standing plans existing Partnerships the to our to desire. deepen commitment reflect many our around

couple Don, it I businesses. highlight a of to wanted milestones turning of over X Before to our in

suite solutions, our Scheduling look management, Our rates. evolving in employers sometimes from XXX,XXX over labor reached continuing quarter, important a legislative invest time than in workforce and workforce of first last double-digit management to become attach the benefiting in as to management and client order precisely meet to years growth higher more forward more solutions referred drive clients has few years. to for requirements, tracking to we recent these and rate time

XXX,XXX to than state and up of as in than from We the we services for well their of serve is SECURE provisions the companies additional end XXX,XXX XX% our the recognize positioning as retirement the We and for in X.X served sizes of now the more years clients, continue their mandates eventual more all Act will retirement. importance to fiscal phase ahead anticipate also continue retirement workers of services strong which XXXX. business clients growth at remain

XXXX I'm progress. strong fiscal our financial meaningful results proud with and of start to both strategic

in Our performance And consistently road to us associates months and outstanding implementation and moment I'd whose to are our and shareholders. the you deliver busy. sales, clients a our for for positioning take this to keeping Thank is technology recognize mind, like incredibly us across efforts all. our service, ahead map with

over I'll turn to Don. that, it With

Don McGuire

you, 'XX are our had a making outlook, and not Overall, are and provide consolidated moving our more morning, the update there quarter on some and everyone. Maria, outlook. to good for but you QX I'll pieces solid we some fiscal results our changes Thank I'll color on cover.

segment X% a Let increased on Employer on basis, ES Services. currency revenue of basis and X% me an our expectations. ahead start with reported organic constant

demand As is environment start our strong guidance. X% track pipelines X% had The are we Maria are stable, shared, a bookings in on ES new our healthy with September. growth and for growth solid business to especially

if a expected. we XX slightly At the in Our small did year, embed we business are versus our year an continues outlook trends due higher XX maintaining retention, ES which outperform rates. full for losses increase than for to decline to But prior point slightly continue, better basis would recent retention to point, this we that hope decline range. in but to then that to was expectation out-of-business QX

are to X% gradual year. line this our in in was and very we per to maintaining in for and control the with growth full expectation outlook quarters decelerated It pays our growth the X%, ES QX. for X% coming modestly continue deceleration expect to

prior of We X.X%. to to a forward with revenue interest resulted line funds year funds our yield funds modest full in as our the our latest strategy expect million $XX extended outlook our our QX, based expectation from the outlook. interest client Client net now from in raising well which revenue average we're increase up from in impact X.X% client expectation in yield but increased as prior be on curve,

fiscal 'XX Meanwhile, adverse revenue funds drag revenue year, to prior growth, the ES relative of with the In for a strong FX ES rest of the growth strengthened, movement. client range offset combined outlook. dollar X% higher-than-expected our total, revenue QX U.S. And maintaining effectively fiscal our X%. revenue the we're our to representing 'XX

contribution in basis XXX client from operating by and interest increased margin ES QX, both revenue. funds leverage driven points Our

anticipate of projects to small reflects outlook higher XXX and spend of year, For by amount are of an a raising usage as XXX as well higher from partially benefit yields, which recent full now Gen basis points, fiscal our acquisitions. offset increase the 'XX our AI on we to dilution the

the X% worksite by to in revenue employees X% we growth, had driven PEO, on growth Moving in QX. average

growth count control our resulted the in lower a were professional per worksite than but employee and continued As softer growth expected, solid, for industries. to anticipating. in PEO QX Maria earlier, pays clients tech we particularly was mentioned services slightly than and slow was This bookings

with As a X% average to XXXX X% revenue X% result, we now in growth worksite X%. PEO expect growth employees to fiscal of of

pipelines of fiscal half employee worksite to we healthy, Our PEO continue in growth back 'XX. sales forecast the ramping their are and gradually

by for driven a basis PEO with between down workers' release and margin benefit in than expect we 'XX. is compensation assumption selling as decreased higher fiscal year-over-year We basis XX XX as compensation points QX, in reserve XXX a 'XX, higher planned. release lower as headwind from well experienced expenses a which well primarily expenses. selling lower be reserve to we more decline The points as in margin had fiscal benefit now PEO that was workers' continued

expansion which the margin funds Putting color in had it some and that share together, balance in modest quarters pressure In the our our this all I X will client impact. we've no to than years, our as as consolidated creates result other balance client to grow-over change deferral for outlook, of well is balance on past tax some lack QX in the modest revenue QX, there a on growth but more [ ] impact ES will cadence. year funds our average would payroll like

accelerating at in result, back of And back half. slightly consolidated we the to the This EBIT of the a already outset year. was moderate down our adjusted in the in expect margin half we growth before before ramping be guidance revenue contemplated As to year. slightly expect the

So again, consolidated our no to change guidance.

around to still XX XX%, We continue and We of expect rate growth margin XX%. to to of effective we revenue to with basis 'XX EPS anticipate fiscal by X% consolidated for XX% adjusted our 'XX fiscal to our growth expanding XX forecast be tax points. EBIT X% adjusted

I'll back it And you. Q&A. Thank now to Michelle turn for

Operator

[Operator our take Jefferies. Instructions] first of line We from question the Samad will Samana with

Samad Samana

double to side. PEO want just the first, on Maybe click

maybe into the base that Where acceleration the I will moving an the it Maybe that PEO especially dig of stabilize? purely Is broader continue because should different the decelerate. based as you they're per half the back we expect confidence, just help gave in a to in get of bookings us on ramping? it some the ramp that based giving further just guidance. expectation WSEs? little on Is helps macro happened information understand bit directions. in think us But in understand pays control you what's what revised that to kind

Maria Black

You it with kind Samad, I'd the question it's to thought double your I bet. respect click. break Maria of here. down PEO, call

start first the I'll on commenting So quarter. by

we mentioned, PEO pays control. see as So did in per deceleration

a skew So happening The as business pressure technology. per control to the broader more comments, into that Don cohorts you by-product in those seeing know, opening mentioned of -- deceleration in what the is tends faster to in the pays as that is with base. we're services, professional at than clip a respect

said in faster PEO faster than those the and so pays specifically decelerating And differently, we growth is control cohorts. the per in expected

PEO quarter. first new in what we did for. that to said, come below contribution terms the worksite in guide that That quarter. employee strong is of contribution, have it had So did seeing or hoped deceleration bookings in the in the the growth we're first the We in slightly to

yield was a the strength PEO, it Services. because with ultimately third that's in now Employer we're seeing bookings what It bookings in about the quarter in And that So quarter will you're really, in back half; PEO. that retention. asking in PEO for higher reacceleration good the this the row strength coupled and what than overall is the still we've important to in that, seen note of kind was is a the

continuing we last that years we and it, that's anticipate stabilize, or we retention retention, and in guide year to from to if isn't of so. the given. the worksite those lap, compares the see retention for call while will really we've more such, the it see levels growth high back And as accelerate, will, PEO, with from coupled you versus the So to contributions employee we'll bookings, year why as contributions stable ago, couple continue is inside stabilizing a that saw,

Samad Samana

actually Great. international side. then, And I Maria, on follow-up the for you a had as well

ADP product just seen HCM how the a revenue, have maybe that we're contributor should and to Just of move think U.S. the think I'm know should we in into international that the solutions versus being some the has slowdown international presence, core the a helping already an curious, We expansion international we it's an employers meaningful the offset just rollout as And of think beyond about but how and I seeing your impact Ireland. to about just already cadence U.S. we you should about more revenue? with had presence? U.S.?

Maria Black

absolutely. Yes,

speak commented I'll in So to Roll, I which the on is what comments. opening

no our call where really into excited couple an of still pun opportunity about space the very countries ecosystem did within international it, about on albeit us, call all leveraging around very, very it's it's that we're out, we it, And to It's days, is because see offers weeks, actually services, offering been distribution downmarket various So intended, we right? the first greenfield of our it but international. taking countries we many product. for But Ireland. early a countries. only in we what the offering bit intend roll this, is And it Roll from into it's really throughout everything That's the marrying have. potentially our various that and exciting

So we're very that. about excited

a a this see be for us. about continued even that say Now I say long-term meaningful of into we across in contributions me, Roll would overall this year, they're making not negligible. I the rolling it time and I would what To Roll would we're in think the international opportunity out think growth Ireland, I investment term terms bookings. really a is contributor short of to over as

of that presence call that, in in with Europe working offerings would these So in mentioned I U.S. also or in you best-of-breed is companies in the folks that both have the kind lot answer this And what it with coupled a international. exist of is international. say, our, a

market, from now which see that's Roll. across product the really of everything after with the down offering this we So growth board and in international, new we're going opportunity

global space, in best-of-breed in we in space. it So MNC we our see see see also we it SMB our and the it space

opportunity excited long-term really that international. be to the about So continues growth

because with very I in And strong is just of obviously while is that we did heels on mention that was thought to important finish respect quarter the what of international. last quarter international, it's a less I'm very year to compare a fourth international, was off I note, QX quarter would albeit have favorable, it but of on strong a

be and incredibly and build what in around, go the I optimistic can our about And to continue it way to accomplish that international so is continue excited we offering. all

Operator

Bryan comes Bergin Cowen. question next from TD with Our

Bryan Bergin

came if hoping specifically the have can situation how about was areas areas evolve better that and downtick may affect just the that expected on seeing any segment, that than you can been versus quarter. I within if versus you macro or maybe Maria, some of maybe you the ES overall And talk may prior how the in So comment that lighter you're unpack demand.

Maria Black

on with Absolutely. also happy respect in Bryan, of saw to we demand. comment what to the performance first but bookings overall so the the quarter

kind overall strength in see continued our of with performance. we the did start opening I strength, I'll So mentioned comments, market. down in the

in that. compliance about saw excited offering. our really tremendous solutions So strength Also

it of things hits that compliance, stuff So tax, all the nature. think of that as

Those are with what respect we're the really to outperformed. our business we pleased So with X saw new bookings. that

a that's services, strength that And our makes performance down we from it's making me meaningful entire -- where market in offering it last well that year, of the the insurance well, happy saw it's distribution. both We of regardless. see finish a because to to as makes retirement continue product me investments last there. lot as happy everything definitely RUN been places it's the see good the exciting to But that and lot tremendous year and offering, -- to of because and places services, really all we've the

and excited see to the there performance So the outperformance. continued

keep with full line year our in results guide. overall do The us

So excited to confirm that again here today.

demand appointments of Demand still activity our upmarket, not strong. terms that is of and we're really overall changes such demand whether In -- I are in of but the major Certainly, a demand in seeing demand. and in all We we results. in give saying looking on the There bookings that environment, feel is kind quarter-to-quarter, I've the been healthy. us see strong at is at we're this like the of any down still mid-market. the pipelines things terms indicators really look other new in in guide market, measures to as sorts

I And are pipelines you, healthy would tell activity and year-on-year, is certainly healthy.

don't And we demand see a quarter. this big change again so

of good fact, is In our quarter which about us really sit guide. opposite into kind pipelines a on heels we again the giving September, of confidence the year-on-year, year the feel the stepping strong the where full in

on eye though, always, continue As an to we macro. the Bryan, keep

our sure We you continue on kind making could an any keep shift, if will. given of both and understanding the coupled demand with everything in that to any global that eye environment and going we're world, changes, on international space macroeconomic

story kind of So demand that's on pipeline the current quarter. in the

Don McGuire

we're States. the Yes. recession. to a odds Certainly, near Unemployment not the comments continue quite be lows be decade If whether positive. in continues The or in I low. United Unemployment a rates of here going world be to continue macro. to the for be could macro a about are not discussion couple add rates to around recession, the on pretty now

what the pretty anticipated. land Interest rates expected in are peaked much here have being soft is to U.S. is So

So are pretty think things positive. all things considered, I

in slowing we that we that for year at original our a are growth, continue again, are our look control had, pace and that, guidance Maria albeit in we year. mentioned the our the area pays than about business. in in and once PEO are fully the was contemplated confident we guide still put original in, previously. fact, seeing think per the I we is contemplated we But to But growth that the that in growth. slower we seeing had talked for at guidance one

Bryan Bergin

Okay, the that's helpful. My follow-up PEO. on

also bit than selling calling little PEO heard that expenses start. out, margins think, expected lighter here impacting are a to you I bookings I But So higher year-over-year. you're the

can puts and So the talk you maybe there about that takes dynamic? driving

Maria Black

margins, PEO let Don... on Specifically I'll

Don McGuire

that originally, think lighter than mentioned Bryan, Well, you bookings were I expected.

-- Maria I our bookings pretty been had as has came think mentioned... bookings good, in

Maria Black

than than I Yes, I think around case comment be which made the still year. the balance PEO throughout was By we higher way, expected. the of expect he's referencing the lighter it's ES, the bookings to slightly

So that's the kind of nuanced...

Bryan Bergin

of selling sort there. citing also it So are a the So bit seems impacting there's I expenses the margins? like of question PEO a disconnect you guess there, higher

that. understand to trying Just

Don McGuire

Yes.

And So growth or planned -- the in But year. the line investments talked see what the first than half sorry, had have we'll with bookings and seen margins being off, stronger selling a really half half. some than certainly we second the some the higher in half. in little we in surprising, second about We expenses, in we in in and the we nothing but first will bit we're certainly, expected.

Operator

Our question James next Morgan Faucette with from Stanley. comes

James Faucette

quick to follow-up couple of ask a wanted just questions. I

why First, bit survival I better a performance terms was still the go-forward to could things on as rates have you Can a rates little worse to you think a you're seeing made provide may you're been that, bit go-forward think kind help what on indicators a better of comment as you in of anticipated. detail and those But basis. basis? had anticipating that you get looking than date, at out-of-business seeing, we're worse some that the be

Don McGuire

strong going that that to think to a recession, economy continues that's be going we're demand Yes, the overall. be not just what view to a enter And to I supporting soft in be tends landing. that's this into

small business keeping think I demand, in strong afloat. environment, demand particularly consumer So that is

at business you formations. there continued new be of business to in formations, we're strength new seeing also seems when terms So what look in

translating the out than itself the for would I be contemplated. what to favorable rates, be to that think say that's environment interest the continues looks environment, So of into higher lower of irrespective small business, business generally, I and

continued, or and here said update that as normalization continued we other business. to as will in more see have think we we guide have today, reiterate we original little our will a we bit in Now

have we to think So getting are closer the hit or bottom contemplated plateau we that, we going we're think there. where we to but

think I generally comes the economy demand think close. as I environment, to we're well. tends back broadly it small more once again, So more businesses and benefiting to and supporting from very just it And be that

Maria Black

Yes, I early in think think if the level right? We a add I I that only is retention, I think record year that. have 'XX. it's thing at the very may, So about record I we did the that still when We in would year, that level near fiscal a before. were were year record level before

terms so all tremendous in think spot strength, perspective and of is macro Don this client I in that strength retention. reasons from terms we've on a that And we've the had had of

year it's so in retention And back planned still is by-product how the the have really of for we prudent half. we as normalizes, we a us believe have, that the to guide that which

question the this got in and which last And I are think quarter, answer it's I answer being we think proactively conservative? still that I to is, I'll So quarter, year. it early question the is so the just

And away sitting into outperformed hope we full that in very so will the the just retention the X if continue year. we to conservatism that that outperform do outperform first year. a take way quarter, months in early short here just we for It's we long to

James Faucette

of to kind back headline-related Yes, question. to yes. go And a then want I

benefit in long you to Or Can services. we improvement particularly big or kind that before of what talk you seen sequential the track services And saw new business? can impact mandates? retirement an XX,XXX we anticipate around how state any may there, mandates and you indicated had retirement of a -- state may impacting saw Act a that you alluded to help little new You seen for state see or about some bit you've maybe mandates you X.X. requirements SECURE have. post that be how start like So headlines in clients,

Maria Black

Absolutely.

services in the year report continues to And Act also tell part into bit as SECURE because retirement so. the new quite excited adding today, it's I've So I to was world as over I tremendous think last that show business but to the you, spoken the well value a is I I because a work. business strength, of or that know milestone will

the Act so which And offering at also are we've into go anchored of state a probably hour of state. investments state I state some mandates, offering, anchored is the an and terms level, by the made of the by-product various with you state the it which come It exciting all are spend mandates. SECURE as time. into some does the Candidly, federal in could the an of by and

into, see we down that What companies it, creep starts needs over is market. mandates, of call not the with year state threshold the the to so or comply next to if the further micro market, the

if continue But have spaces to the Coast, these as keep again, for each helping them mandates something will on in this West back tracking like state you're one good these they that's world, SECURE these the to value comply looking down are doing our what and/or bringing compliant. to at we being opportunity level of that more clients them piece, of states, also solve clients. the for the pull employees need to headlines, that the all to it's engaging you ensure a And the so with lot as do California, Act, we're with

So...

Operator

Our with next Bank. question Deutsche comes from Bryan Keane

Bryan Keane

the ask Just in PEO. about want to decline

Services. like the base necessarily Employer case, Looking the in not PEO at versus almost the looks the employee opposite declining it of

bit Employer? does a for you versus in PEO little think trends. just PEO weaker pays So bleed and the And the maybe see per about it's trend to in trying been typically into control there why Employer Services

Maria Black

Yes.

PEO So that actually than just number, give Services. actually to Employer is don't clarify, but pays higher. per control it's in higher We

right? the you So first just piece per control suggest reflection ADP, different, if look broader the that pays So bases across mix the is of really I it's are think at to industries. a the a actually of

if you to, tends companies for offering. employees way, the As more really will, you their will, cohorts earlier, by offer the if is valuable, to the want that offer employers It's to services, skew choice, be that mentioned or to by the tends to we to of the offering professional the tech-oriented which most I benefits choice. employers design, PEO of the

And we're so And PEO seeing base delineation between the the if you overall. the those within slightly differently base, cohorts of than a base that skews is and will. the that rest what

prepared rest at services professional the that in it by-product the decelerating having the PEO cited of and the a but we still the a happening is that faster tech base. within deceleration So at is than remarks, clip base,

So your to services in we see ADP with of across? -- Research market question, data already the a hiring these bleed and market. and own our think headlines answer in different respect terms we're the within position tech to it I than Institute the does rest professional being of it in hearing

bleeding if of couple So the I been suggest I same data, would it's BLS tracks quarters also the think last of that. look shows way, By already the that across, you the at thing.

You it wages. see in

perhaps than seeing the the in I the more slightly PPC. macro, already a would significantly by the the that PEO we're which is in feel impact That of are And all so to it but suggest, the different, mouthful, in was would the you you would PEO is PPC way. say, broader the of trend in bases why

Bryan Keane

especially that X% but you're and helpful to new pipeline question the the X%. then you was of saw total bookings, in outlook the looks, other No, the changing strength just not the September is the way ES had in though. And I

things saw you you to trending strength out, the are trying bookings in range trending the like if in strength in quarter? do above given pipeline figure you guys and guidance for the feel for September the hold, Just SMB maybe

Maria Black

is offer heels was an What last especially would the the pleased that incredible I'm results in Yes. the of with first on what incredibly finish year. quarter, I

And saw the that quarter. the pattern of strong so incredibly in we first the pattern the an the we quarter in is September of atypical quarter the see heels in not and on fourth strength first

about, see about us we year And am does excited we X%. less first at what the about full I on see into we it, September. the and confidence September guide excited X% strength see that what about give in am stepping And that in so actually this in is excitement demand But more environment, what results. activity, into the to our the call the next finish I year-on-year quarter quarter.

And first bookings much, also What will, is the that year. you on think the in larger of about is it and though, where third the a if contribution long than it's new call us business you it, quarter year are I basis, full fourth would and offer, or quarter. second a skewing, for when happens

that just And performance. sight how us. end. But we we excited ahead at have we given entire guide. the line the of but quarter excited prudent believe so today also year confident about it's quarter we're the We're we of quarter, is, the feel second We're into an have in that stepping about still

Operator

question with next from Barclays. Our El-Assal comes Ramsey

Ramsey El-Assal

that the Are Could you any there give sort in us with on is providers? think environment time? growth your is to competitive there somewhat latest there across evolving the thoughts of I competitive signs overlay market Or and industry. any PEO that's is performance? the slower-than-historical saturated PEO over how

Maria Black

PEO/HR offerings will, report, that suggest the outsourcing new don't I PEO/ASO of continues. you if know that kind anything would to or I there's Ramsey. conversation,

I have We vantage very all point, environment. another. from a competitive my always one think slightly it's been PEOs different from

it and a tech. I way to ours lot and today about think we professional the talked that skews services

have industries. different of you types I to others skewed that's think

bit that than to other a have bit also are You down market tend more up some. We PEOs more skew a market. perhaps little

slightly think so all look different. And I the PEOs

identical our the of know advantage upgrades. about client those XX% through the also all base models to and ADP's how go to have terms are we not competitive actually we in strength contribute we it's whether of able being that think I have market, of

models go ASO So our to as some refer fully I offerings mind self-insured, HRO et of how models, never think the market, I think we them the within similar to trends are to offerings. cetera, insured or

or various more think competitors ASO between -- cited I and go-to-markets also past. some we've so movements you the think terms within there, PEO And some I in flexibility have various and perhaps than of models have in the

that think the all to I competitive is the remains. so same suggest, And environment think I and about

am this well year. balance HRO I the ASO our PEO as and growth think offerings in as expect optimistic of both throughout I bookings our and

HR very, very this our the and in we excited of those, outsourcing offerings, think I of so all And long well the optimistic term. as about as both remain growth year

Ramsey El-Assal

it. Got

comments Could that step-up nonrecurring follow-up higher sure not you exactly? selling in It's What the a there's to those a expenses. about there's in permanent in And does just expenses still, to continue, of expenses segment. me. those step-up for I mean expectations ask some wanted but you Okay. in I revisit PEO? I made understood, Don essence, in that that And mentioned a may sort also make

Don McGuire

expenses selling down going the think higher half. that's year-over-year the PEO, that and the second we see higher Yes, selling QX to we first we settle half, into to saw for do but expect in expenses in

So looking last we at the of we're year. kind saw growth not that

and the to did. think year and year business many I great extensively the many, quite way into allowed we commented we we've the on added had us finish salespeople success last the

place. So those folks in are

continuing we are So to add sellers. some

half. though, in first also, important we community. our those that are what is seller within with We that sellers we I it's out just are getting think, of better will sellers here And add, the seeing most call retention much the

of from are we benefit the we should the from So go as the organization expecting to tenure that we year. balance improved selling through hoping this see and

Ramsey El-Assal

I got it.

That So primarily. a makes lot of it's sense. headcount-related

Maria Black

a Yes, timing think I it's thing.

I think that's the...

Ramsey El-Assal

it. Got

Operator

Kupferberg Our with of America. next from question comes Jason Bank

Jason Kupferberg

Analyst refresh thought was and a can bit just second we PEO on grower. little Day medium-term staying years I'm Just a the back XX% it thinking X if to ago, to we just here. maybe a XX% for

of potential definitely the if normalization. from is at little just, terms some path want business post-COVID more back moment. the to there dynamics it's the us the And But if Now There a in macro for to is maybe to your cooperative? bit how you a evolved has just business growth perspective. Maria, X% was through double-digit take X% back this

Maria Black

Yes.

the I bookings. the from of kind But kind reacceleration vantage point, my I to think Don the So X and that of step back. and path I'll of let medium-term speak is targets said it continued today, earlier

bookings so That last before. PEO it the quarter. overall we're And the was case quarter picture case that in did third to bookings and contribution this quarter, solid a the was have the we the pleased, this quarter is of

is because think offering will proposition with market. that not the just reason -- accelerate in for targets because are the still to and strength I And and value the of speaks I piece us I to it's the the the the what demand environment. to back that that pass also growth medium-term that business, go to that our goals it's It that exists and speaks it think long-term

I piece it. so big of And think that's a

I is the think step retention. X continued reacceleration of acceleration,

last revenue. couple been reaccelerate stable. that I we has into been that also last that the retention as So contribute that nuances I retention will then not the And mentioned to, post-pandemic, it, you think Jason, least, growth, that's that And I it, how call back And quarters, mentioned about obviously, the macro talked of the impacted but headwinds. business.

we I the about couple renewal talked quarters. think of the last over a lot

Now we're in seeing PPC. these trends

those, up a we of quarters and the call tech wave ago, we're be hiring call in being the that that several in it, which boom. point and the been, flowing case the post-pandemic would model, services all of some when all that make of professional that really, reversion seeing variables still it, massive what saw have through My was PEO view was

these I Now business with -- -- we're flowing to reaccelerate through shuffling through or seeing some have changes the that, the that respect opposite of PEO. of and still waves the that, right? that macro when And we well. through certainly if of think will as or help going whether kind So

speak back, path the let medium-term of Don terms to kind targets. the in I'll of So

Don McGuire

Yes.

particular. services targets, of we environment I spoken saw had midterm segments changed a I we then, say those established incredible And we have in we lot thought or we certainly comprehensively beyond that in when and think since inflation Maria and mentioned what seen things targets would that what Maria the very think growth or we've I growth the professional covered just technology, predicted it there. to. the -- in midterm

continue we and to our had back. think we But to incredibly think little We to going forecast to when now business. about growth also think that discussed. definitely those areas we're back think positive as that said, do, some some it I be will seeing We reversion. make of Maria midterm we place, target we're bit though, has it's a early get we a way that

Jason Kupferberg

that's No, good color. Understood.

just slightly a Just quarter-over-quarter a But rate like QX looks on actually float there. curious be the amid here might was follow-up yield. in It call-outs what it down tick higher environment. a

Danyal Hussain

term Jason, and the and that short just to mix long. between relates extended

to were But skewed to deliberately we generally overnight more levered QX, short in in We have shorter ceiling typical this had of debt So because little QX, be duration. a a would partly a portfolio. we issue. lower

year-over-year seasonality is balance, number read there so relevant the average wouldn't into metric. And in is much more The much a it.

Operator

question next with Our comes JPMorgan. from Huang Tien-Tsin

Tien-Tsin Huang

me if on side. another Forgive asking the PEO I'm clarification

PEO, sectors? is or the related the -- those control that And labor pays per sectors? PS within also the just slight slight with bookings issue the weakness care tech softness more the to participation a in was also Just and health in of

Maria Black

question. yes, mind was actually your missing. you during just out of really apologize, part there I bleeped first you -- a Would word the repeating

So...

Tien-Tsin Huang

very ask probably well. it I no, No, didn't

the was per services softness Just wanted then participation? professional on side, that the And it tech weakness to also sectors? and PEO control, labor the health just make sure also or on pays in bookings was the care

Maria Black

just very Yes. glad reiterate, PEO actually question I our Listen, I'm asking so this you're bookings. pleased were to with we because want

so There growth quarter And softness. there the bookings. was wasn't in and strength PEO

it But to about year, worksite positioned employee of deceleration In had terms than which slightly it the we is worksite way overall planning, is why employee our how again, the that PPC growth. the was lighter it does skewed we the really contributes the story.

quarter we with a PEO And just actually so I from pleased the to were very want perspective. bookings reiterate,

a think I it's In terms the mix. of industries,

continue those see tend which execute I we that with the the think industries target, be PEO categories. to to into we to respect

again, sitting the is deceleration entire As it don't the base base that happening that it within is this technology broader of the services. in isn't you the the but that of of subset, the like around to services kind will, It's comment of professional and kind I give base. faster to is, if relates want of just versus what in professional numbers the PEO, PEO,

and same of really is out Institute, hiring. of it's of BLS, the the to again, triangulates data Research type and it that the seeing we're kind And about really of -- coming macro ADP out

services Did So really It's layoffs. it, that's those it's happening less professional about, And it, businesses. and where a lack that I quarters the it's ago. of call a doing really industries massive X year answer were hiring, in call ago, tech question? hiring

Tien-Tsin Huang

Yes, so. I think

I think the...

Danyal Hussain

it, the would Tien-Tsin, be. impacted wouldn't of pays the revenue by control just on participation the but reported be rate, participation per piece

extent the bit fewer workers little plans a there's or plans, of are that. cheaper to plans, taking So

per You but be impacted. do the it revenue WSE, the see in wouldn't WSEs themselves

Tien-Tsin Huang

it. looking Got I Danny, you. That's didn't I for. that's what ask was Well, perfect.

-- we about was like the there's well. That's side it why I asking pricing isn't. there. get of sounds if things On a the around questions and It as participation difference

On front, the just follow-up. international quick my

-- to to just own? a international plan in aggregate call-out acquisition. maybe you're this as I'm Sweden broader of I'm terms if Why curious familiar And the was is Sweden of part of think I not payroll. specific with important targeting. some Just that is Just countries the a

Maria Black

Absolutely.

I to Sweden. -- this I that take have was know you raised question may because actually I think I'm born and listen, partially So in

very to the I us, But in time well announce. my obviously So sounds it might are. closer an This like us. first I'm I And kidding. it that time. it make thought it actually be you to motion was for is Sweden exciting prudent was completely before country I than for

this for BTR with quite We have some had partnership time.

into payroll of the those allows this of us economies. advantage into be and able growing, which a are is Nordics us the physical to business Nordics us to the Sweden, expand take because growth acquire further BTR to give exciting really the trajectory footprint of does and For

in beyond-payroll So come. this to is obviously also will in years have that payroll, but the we opportunities

to the Nordics it's there. the because us think because a growth, physical just about exciting not So moreover presence acquisition, really near but having heart, it's and excited about to represent dear my and

Operator

Togut from with Our Evercore David next comes ISI. question

David Togut

with texture the in market You strength particularly enterprise? appreciated. also the And some bookings, quarter with mid-market provide with RUN. Workforce you business have the market small international in be insights you in ES up would bookings and saw into Could out into in bookings Now called any you then trends

Maria Black

Absolutely.

up of of on That's offering. we in have HR inclusive we did continued down Now also great strength our inclusive kind the have Certainly, of mid-market. the yes, mid-market. in platform. outsourcing our moving So demand solid markets, Workforce the in It's

I the a also bit it's supported the about PEO. spoke So in ASO mid-market, models, earlier that by models the HRO

the from mid-market. demand continued see do we So

being think mid-market I getting always the it, way I any companies to in employer an that think navigate for today. not about it's easier

And so we expect continued strong mid-market growth.

enterprise up strength I the last this think since space, asked quarter, did of made the strength was we is the about in continue call-outs about offering, fantastic. see we which you think and market, Generation into HCM one Next we we the that in quarter that saw our

pipeline the strength in in that space see year-on-year. also We

the So excited space. the we're about offerings that the around have clients, enterprise what sentiments we our in from hearing

we international then what the But think ago, as our And 'XX. our higher a Again, I did our partly I really feel little fiscal finish an to touched really a first I through our year-on-year. healthy the bit But also bookings gives Again, forward, pipelines good business but strength amount on the of a was measure little a had, strong than fiscal pipelines. the it's it mentioned, have say, I which they international us results. business. what grow remain is compare about quarter. bit did a international I to the And and a year-on-year really as earlier, nicely I easier year in benefit look think international fair 'XX of strong about international about would in

David Togut

adjustments in think PEO follow-up. comparison for comparisons QX, were reserve as you difficult year the part Just Don, to a for the of and a workers' those a in PEO? margin being quantify us as 'XX margin QX basis we on point Can you large FY out how of ago. XX through QX called quick decline traced compensation

Don McGuire

Yes.

So K. last of as and called years you year know, we've last the had very in certainly favorable number reserve releases out over the

seen have would there. You the favorability

clear, that still reserve the did the see we QX to but just we we the didn't we seeing are not favorable reserve to year. seeing release of be releases, prior extent to -- So are QX

in prior it less million the will Q, be in the than the was it's So about $X.X year. but numbers

it. about So bps decline the margin, that's of if bps -- of translate XX reserve release. the the lower from kind XX you XX of XX quantification And that into the to it's bps comes

releases. to let think or to lead actuaries favorable about we're the see again, changes any get seeing in not once know and but going underlying continued us us They seeing as what's back reserve less we're large optimistic Now releases happening, to were that that to be us continue changes the reserve. any would we

Danyal Hussain

to just benefit it less QX, about which year. million a the than $X clarify, sorry, And in $X million was prior is David,

Operator

question Mark Marcon comes next with from Baird. Our

Mark Marcon

At wondering monetization? HR you which new tech, in focused a solutions got I've philosophy And regards talk additional would you improvement. on follow-up your charge lot can you terms then of with for. process your solutions, a about you thinking got to see Maria, a particularly solutions. of little bit about How to the AI-assisted I'm if are

Maria Black

seen Sure. of HR about I'm at have that tech. would excited pretty you new Mark, our solutions all

because how monetization thinking I I AI, I think general, on Gen the I'll think in impact sense I more you about side. when how to make through then about thinking about and So I'll of think take -- a everything. think I'm will Gen minute kind think or talk AI But tell it I'm other it'll

going the client everywhere impacting entire the So be that do across it's everything life we is answer to cycle.

how seller we clients. acquire them, how we productive and being most implement and to actually leveraging we how clients the how have our types be clients. then years products. about as AI we It's the embedded productive about is modern how about. into Gen And spoken So That's more how to stuff Gen we become will product. now talking that I've It's everyone market for copilot from go obvious everything and make we it's our ability developer AI develop about serve how of them, actually that about tools serve our more we

everyone we likened of in become. so I to I and probably everything think fabric is things it think whether that will be has do who and answer AI, -- Internet, the when Gen most like about us my in the you And it's software think to we or I

side, charging And [ so in a ] less monetization I terms a of on think the about feature. per it's PEPM

today, of some if the there I earnings doesn't look roles. screenshot exciting, say, showing you talked at like that let's the which the probably So about report see writing description a you'll release or sound pulled that's things document, job in in

don't probably I are AI exciting of -- kind they used with fabric. how that everything of Gen innovation, will they're that the things sound exciting, do to as in earlier, seeds interact show So the in because really these we but what pretty

written. AI going AI think said So I description to we're like Gen don't charging job be or get differently, Mark, to separately written Gen report

more really is done, I of about productive. productive. in and journey solving me, do about end up fruits to to which innovation things think always up retention. becoming the and bookings think it's It's continuing really making really And business new more our about I end clients our labor that, the in them things all they we've that for

about the I And clip. it's us really suggest to there. me [ on. I'm don't things. $X.XX we're journey that faster the PEPM been not that that's just ] do here really a things excited This so really may optimistic at there we've to And it and innovation be and not think me, to To about it's allows about But seeing.

an engaging measuring, in we these out sales organization we bit these many or are of technology that and We base touch end a chomping at service have our our up them. these would year, already by prospects engage digital associates XX% already that sales to I the implementation of these and sales we've become modern entire in of that the sit actually our that the some tools sitting goals now, how much tools. and there of because over with new deployed to In they're you, inside tell things have entire the that terms are playing put and the productive, of to sales of have or have we're lot with actually associates years across new terms other that more our engaging organization Right of, above tools a where ability tools. ability rallied sales.

of on life tell, you we to think like all will So on, I across this literally that client cycle as And have. could the everywhere make up answer you very probably can the major metrics go be it about entire long-term I'm but great this I optimistic and my on and on implications business is the model. that

Mark Marcon

gaining are terrific. how along you journey? productivity could go continuous that? become? you from that just much how you how just there then longer-term enhancement, as continue it's efficiency I about about your we service And when implications margin and That's days, the but end know service you improvement and from up with the to I more mean, think a thinking describe perspective, implementation, regards could And early to you much particularly can think personnel efficient

Maria Black

innovation. goals commit and think, change for earnings have right? we on business to learning line this internally haven't does house go had we've machine sight productive, these pretty right? of it's AI not many though had But because exciting for of become years over step we Mark, not long how early we of scoping early, a us scoping for chase. Listen, Yes. that that's an numbers. still our and having lack of us and And sit days, a call it a as what time. a I are regular lack in for So to to all on give But it's it, not and too more And that's cases believe to is to had

used I have the code I'm And big we I of again, a But into Assist and But that's we of doesn't side the call it. a on this other who or for of a hopeful call see prospect client some see. it's that on probably enhancements we really usable. know recapped that piece long exciting. these of is have to productivity and that, gets format call but you finally now of actually whether very those it can technology Agent sit big time, certainly, a quick Again, that summarization. today goals crack a about idea for summarized some sound someone that existed talked

I have rapid about These to something planning. XX think prospect are are value, with to seller all side, And the have hours our I to in used years the that enabling pre-call company a sellers a of Even hours productivity. on ago, we called brings researching get conversation and myself actually ready time. launching and minutes spend to of a go that

I of value case the to that to ones to believe our of early amount are it's, it's value our back the we to of sequentially quantifications. arguably, and most amount most really most again, candidly, accretive of clients. will be looking shareholders, drive the millions of kind give of by most But productivity, dollars but So types amount actively the we think hundreds of picking you too of exact the case

Operator

Scott for more question Wolfe time with one from have that We and Research. question, comes Wurtzel

Scott Wurtzel

sort the solutions complex strategy vertical-specific vertical. more on I'm HCM software, your Just understand develop clients? there's of that bigger to may for but this a if is construction just wondering, a a wondering beyond more part launch of the of vertical shift be could the construction construction more develop I of vertical, vertical-specific

Maria Black

years suggesting, always existed. companies, you're construction that And I about have a be lot the selling to answer and I think the And like I to I candidly, could I XX that to they from think has ago. that together pulling and yes. compliance the for used of what to when back sell an ago, complexity So years like job and are everything things have nature. we it functionality think now existed many and vertical costing, features reporting, of certified that reports obviously, of that actual about And payroll, and solution things that's for compliance make think type

can about with service And that it's support that and organization a of so really together vertical. complexity the it pulling marrying it

me, a think big is I to that, change.

saw add did had marrying it we've and and construction dedicated ecosystem of we're the with a complexity these being we this lot in really of pulled them the that vertical So industry. And together, actually a we service But things can features. some the of industry. help org that

offer dedicated the verticals. for suggested, you specifically beginning So Now for industry, of could I model it's think our And with an the time our construction would of we that, that real I type other Workforce existing together places see a pull in I what tech clients. as is solve challenges exciting business just various as and the that for service

Scott Wurtzel

Got follow-up. helpful. just it. That's quick And a

and HCM Payroll Next Gen and if wondering sort trending rates on sort Just of we're to Gen how there update can Next attach relative expectations. an give you of

Maria Black

the Gen So that Next question? Payroll, was

Danyal Hussain

Both.

Maria Black

Both.

it sure making just right. I Okay, heard

Gen think we on So strength I that I the that nodded HCM, Next I into see quickly to touched the Next and we in the continue have think Gen excitement I base QX. to really HCM offering

really of we suggest Next in quarter year. can of all strong we What is saw I I HCM the about things we had a fourth But one first the that fiscal more quarter be Gen sometimes me, in lumpy. But sentiment. So actually for again, last than it's brought these think, would quarter.

would an about our talking with last impact a we stage that for shared on us making handful you scaling backlog. our discussions as And onboarding so had them. Day. We the over we lot the implementation, recently of is clients remember, of the up Analyst the a spent And had platform year

exciting sell So it's which on Next see backlog stage, that's strength, continued the offering. proposition, our continue sellers are pretty backlog to Gen value that's some the of to by to excited supported no HCM and to longer that speaking means

all very that's think I very, So positive.

Payroll. continued Next the have we Similarly, in Gen focus

headway. is would I to continue what we offer so make there And

as know, deployed it's entire across So not the mid-market. you

mid-market. that We into continue features, pull things to of the will that of make headway complex to solve for more the nature, market further up it

as to what's also But that Gen Next attached know, Roll you engine is offer. the Payroll

taking N us that exciting thing other about it is space the Gen that's internationally. part the is So SMB the into

that contributions about but the So the long-term I company the growth road today, feel and the for map really also that mid-market of into excited making into it's internationally. the offering

Operator

hand I'm Black for closing portion question-and-answer Maria for over today. pleased our the to remarks. concludes to This program

Maria Black

Yes.

So hard thank year it's here for listen, And you, and ago. on sit not reflect Michelle. a me to

becoming it's feeling and nostalgic And me exactly Carlos morning so I was ago and and the driving announced of here amazing candidly X I CEO in because company. transition of this this sat year that bit a

offer respect priorities. I strong results. And the I'm a on proud progress cohesive so with day. I'm of with associates in this amazing. humbled outline nostalgic make And over absolutely I've is to incredibly every our and incredibly that of thank execution engage company team, for everything results, it the and that I first today. the of very mostly really I'd of who would heard that you that continue had and making an I last over opportunity to terms are But inspiring is year, and like of remain but everything I'm the also we proud strategic both that to what them one and every quarter proud just to XX,XXX with to by wanted the the me each say

that, with meet So is call, of we until again. our and the that conclusion

Operator

now may great day. your This program, does the conclude and for disconnect. Everyone, you participation. have you a Thank

Automatic Data Processing (ADP) 25 Oct 232024 Q1 Earnings call transcript